Earlier this month, I moderated an organization’s first strategic plan review for 2012. As we went through the plan, we discussed issues which I think are worth sharing with any leaders who want to successfully execute their strategic plans.

First and foremost, progress on strategic plans should be reviewed at least once a month. Management teams that execute well keep close tabs on important long-term projects. What long-term projects could be more important than the strategic plan initiatives?

For non-profits, the strategic initiatives should be those actions or projects that will allow the organization to fulfill its mission for years to come. For businesses, the initiatives should lead to a sustainable competitive advantage. When the leaders of an organization can’t find time to meet once a month to review a plan, that plan isn’t much of a priority and is unlikely to be executed well.

One excuse I hear often is that strategic plan reviews take too long. That is not an inherent problem with strategic plan reviews. That is the result of a lack of proper preparation which, in turn, can result from weaknesses in the plan. The most glaring example of this is the failure to assign a single owner to each strategic initiative, with ultimate responsibility for timely execution.

It is not unusual to see action plans with no owner identified, or with multiple owners or even with the names of departments or committees listed as the owner. The owner of a strategic initiative or action plan is the person who should be managing the often cross-functional team needed to execute it. He or she is the person who updates the plan, in real time, if due dates are missed.

In addition to an owner for each action plan, each detailed activity should be the responsibility of a single member of the project team. Here again, I often see multiple names or departments listed as being responsible for an activity. So, who is the initiative owner’s “go-to” person for that activity? The answer is no one.

Strategic plan reviews that take hours are often the result of this lack of clear accountability. When the ownership of an action plan and responsibility for each activity in the plan are clear, then it is clear who is to keep the plan updated. Plan owners should be the individuals who provide the progress reports to the leadership team. When milestones are missed, the owner should report the new commitment date, the reason the date was missed and the plan to get things back on track.

When the initiative owners are clearly identified and held accountable for proper preparation, the review of individual action plans can be done in just a few minutes. I know some will read this and think, “All that preparation is a lot of work for the plan owners.” Not if they are doing their jobs. Keeping an action plan updated is the daily responsibility of the owner. If it is being done in a flurry of activity the day before the monthly review meeting, then the owner isn’t doing his or her job managing execution of the plan.

This disconnect – the idea that managing and executing the strategic plan is some kind of extracurricular task that interferes with getting the real work done – is a major cause of failure to execute and of management’s aversion to review meetings.

Another planning flaw that causes problems is a failure to break large milestones down into finer activities. I see examples of this all the time. Suppose a company wants to increase sales by adding commissioned sales representatives. It is not unusual to see a plan for something like that with just a few milestones like “Add first sales rep by June 30, add second sales rep by December 31.”

At a January review, the first milestone in this example is six months away. There is nothing to review – or is there? In reality, there are many activities that must be completed to have a sales rep in place by June 30. Territories must be defined. Sales reps in those territories must be researched. There must be an interview process and reference checks. It might be necessary to research industry sales rep contracts.

It is very important to question action plans that have a few big milestones, and it is important for the owners of those plans to take the initiative to break those milestones down into more granular activities. Then and only then can progress be properly monitored by management.

Clear ownership and accountability, action plans with key milestones broken down into manageable action steps, and regular, rigorous review by management are the simple keys to executing a strategic plan. It’s not difficult, but like so many things, it depends on good leadership.

Originally Published in the Central Penn Business Journal – January 2012

The New Year is upon us. For many businesses, it’s the season for performance evaluations. Throughout my career, I’ve reviewed performance evaluations in many organizations. These have had various formats, but they often share two common characteristics – they are vague and dishonest.
Sorry to indict managers, but who else is there to blame? Managers are clearly responsible for the vagueness and dishonesty of performance evaluations, and the resultant collateral damage to their organizations.
Some of the vagueness is rooted in fuzzy thinking about job functions. Commonly used words like analyzing, coordinating, assisting and supporting are lazy verbs, describing generic activities that don’t relate to concrete results. For example, describing customer service as supporting and assisting customers is one thing. Describing it as answering phones by the third ring, resolving customers’ problems to the customers’ satisfaction the first time, and remaining polite, even if the customer is rude and insulting, is quite another.
Lofty-sounding but vague annual goals are equally bad. Telling someone to optimize departmental productivity, without defining how productivity will be measured and what constitutes “optimum” is a waste of time. How in the world will anyone know when the goal has been achieved? When a manager writes that an employee should make a vague improvement to a vague activity, the result is vagueness to the second power. Anything involving the words “leveraging” or “synergy” moves the vagueness needle off the chart.
Vagueness goes hand-in-hand with dishonesty. Many managers don’t like confrontation. So instead of being honest with people about competence, performance and behavior, they dance around the issues. Lengthy paragraphs are written, filled with luke-warm praise and irrelevant information, in order to camouflage murky suggestions that some kind of improvements might be in order.
I’ve seen this in my corporate experiences and as a consultant. I’ve had countless opportunities to counsel managers with under-performing employees, and I’ve inherited my share. Nine times out of ten, recent written evaluations give little hint of problems and offer no resolution. Employees who lack competence or accountability, or, who are unable to interact productively with other people, are given middle-of-the-road ratings and passed along with a few vague words about improvement.
This approach helps no one. The employee doesn’t learn anything, the manager is stuck with the problem and other coworkers and the organization suffer. Managers have a responsibility to be totally honest in employee evaluations. They should not hold back on praise where it is due. That’s the easy part. They must also do the hard part and be explicit when employees are not meeting expectations. They must describe exactly what the employee must do to resolve the issue and they must be clear about consequences.
Regardless of the format of the evaluation an organization uses, managers should examine five key questions about each employee:
Does this person demonstrate support of the values and mission of this organization? This is the most fundamental question. If not, one must question why the person is employed. Those who don’t pass this test should be reoriented or helped to find success elsewhere.
Is this person competent in all aspects of this job? If the answer is less than a resounding “yes,” the employee must be informed and a written improvement plan is needed. This plan should require successful completion of training or developmental assignments by specific dates with regular progress reviews. People who are not fully competent are a burden to coworkers and managers, who must constantly fill the gaps. Fortunately, skills can usually be learned once the need is identified.
Is this person responsible and accountable? This covers a lot of ground; everything from coming to work on time to accepting tough assignments. Competent employees who are responsible and accountable generally don’t need much supervision. People who need a baby sitter fail this test and need an improvement plan, in this case leading to a noticeable and sustained change in behavior. The plan should include specific changes needed, dates for progress reviews and specific consequences. Those who fail this test and are not challenged are free-riders who damage management’s authority and credibility.
Does this person have a positive effect on coworkers, teammates and customers? People who can’t get along with others, who are all about themselves or their department, who are passive-aggressive, manipulative or intimidating are problems that management must confront head-on. They should be given one not-very-long chance to demonstrate change.
Does this person have growth potential? This is the question that addresses the future. Sometimes there is no growth in the cards. When there is, managers should work just as hard to help these employees with training and special assignments as they do to help under-performers with improvements.
Honest answers to these questions should help managers and employees to see where employees are shining and where they need help.

Originally published in the Central Penn Business Journal, January 2011
Contact the author at info@newleveladvisors.com

Usually, when a business has a solid, well-executed strategy, someone looking in from the outside can figure it out and point to the supporting activities that make it work. You might think that if these things can’t be discerned from the outside, they are just cleverly concealed. More likely, the strategy is weak or poorly executed.

Think about Southwest Airlines. Obviously it is a low-price, no-frills airline, but far more detail is very visible. Southwest does almost everything differently than other airlines. All activities are designed to support lower ticket prices, lower costs and a sustainable competitive advantage.

You don’t find Southwest on third-party Internet travel sites. That is no accident. Selling exclusively through the company’s Web site, Southwest shares margin with no one. When traveling, there are no provisions for connecting to other airlines. Southwest doesn’t, eliminating costs of coordinating bookings and schedules or moving baggage to and from other airlines. You’ll find your plane is a Boeing 737. They are all 737s, the better to leverage investments in maintenance, training and spare parts.

You may not recognize the name of the airport at your destination city. Where possible, Southwest avoids expensive major airports and uses less-convenient smaller ones. For example, in Chicago, Southwest eschews O’Hare in favor of Midway. Southwest flies point-to-point, avoiding the flight connection costs of the hub-and-spoke system favored by major competitors.

Contrast that match of strategy, supporting structures, activities and competence with another well-known company, Sears Holdings Corp., parent of Sears and Kmart. What can we discern about Sears’ strategy? Are the goals and supporting structures or activities visible?

Sears was once our national retail giant, selling a broad line of wares through its ubiquitous stores and famous catalog. Craftsman tools, Kenmore appliances and Diehard auto batteries are three of the strongest brands in their segments; great products offered at prices that are good for both the consumer and the company. So one might expect a strong segue from catalog leadership to the Internet and a build-from-the-core strategy beginning with those strong hard-goods brands.

Looking from the outside in, what we see seems to be a mish-mash of initiatives attempting to provide “family shopping experiences” at the retail stores and a ho-hum presence on an Internet dominated by Amazon.com and a wide variety of big-box and specialty retailers.

Kmart purchased Sears in 2004, forming Sears Holdings and keeping the Sears and Kmart brands separate. For its part, Kmart has adopted the deep-discount superstore strategy finely honed by Wal-Mart. If you walk through a Wal-Mart and a Kmart, you don’t have to be a genius to see which company has all the necessary supporting activities and skills in place. Kmart has emulated being big and cheap, but not the store design and layout, merchandise organization, inventory management and other supporting activities that make it work for Wal-Mart. It’s in a weak “me too” position.

The relationship between Kmart and Martha Stewart for her Martha Stewart Everyday line further muddied the water. Kmart was straddling the cheap discount strategy and an affordable designer label strategy, and it hasn’t worked. Martha now is taking her products and going home — actually, to Home Depot. She has said that her Everyday brand has been “diminished” by a lack of attention to quality and the atmosphere of Kmart stores. The critical supporting activities for the designer strategy were not executed.

I’ve always liked clothing from Lands End, which Sears purchased in 2002. I recently visited a Sears store and walked through the Lands End display, an oasis of quality surrounded by a hodge-podge of marked-down merchandise and disinterested employees. In my eyes, instead of elevating Sears, that scene diminished Lands End. When I saw it, I understood what Martha Stewart was talking about. Sears’ core competence and strongest brands are all hard goods, but it continues fleeing from that strength in pursuit of soft-goods success.

Sears recently announced it will open new toy stores and full-service beauty parlors inside selected stores to further enhance the “family shopping experience.” Looking from the outside, it looks like an attempt to put more stuff in the already crowded stores. I don’t see the strategic intent in any of this, and I think that has something to do with Sears’ financial results.

If you want to check your strategy, ask a colleague to take a critical look at how you do business versus your competitors. Have you really found a sustainable competitive advantage? Do you excel at the activities necessary to sustain your lead? Are you really differentiated in some way or are you just one more player trying to do the same things as everyone else marginally better?

Originally published in the Central Penn Business Journal “Whiteboard”

Reports state that the air-traffic controller handling the small plane that collided with a helicopter over the Hudson River on Aug. 8 was simultaneously “bantering” on the phone about a dead cat on the taxiway. I wondered why someone with responsibility for others’ lives would engage in such foolishness. I’m sure we will hear some official lamenting, “We can’t get good people,” especially if the controller was young. Maybe we’ll hear, “We aren’t paying enough to get the best people.” Those are pretty good stock excuses. But organizations we all know well have figured out how to get results in high-risk jobs with poorly paid young people.

The night before that accident, I was at the Marine Corps Barracks in Washington, D.C., to see the Silent Drill Platoon. The platoon performs intricate marching maneuvers in total silence. The Marines twirl, throw and catch ten-pound M-1 rifles in perfect precision, with no verbal commands or music to help them keep time. The Marine Drum and Bugle Corps marches and plays a concert.

The show is impressive, but most impressive is the youth and esprit de corps of the participants. To me, they are great representatives of more than 2 million men and women in all branches of the military who have served in Iraq and Afghanistan. Those men and women are young, low-paid volunteers who perform at a high level under extreme conditions and at great personal risk.

There are more examples. The PBS documentary “Carrier” recently spotlighted the young men and women who manage the flight decks and fly the aircraft on the USS Nimitz. Sailors barely out of high school orchestrate the movements of $100 million aircraft in a crowded space where one small mistake can be fatal. The New York Times published an article recently about the increased role of women in combat. Several have been decorated for valor under fire.

You can’t pay enough for what these people do. But without paying what it is worth, with combat deployments almost a given, in good times and bad, the services manage to find millions of capable volunteers, taking people from all walks of life and molding them into effective individuals and units. How can that be, and what lessons can we learn about building effective work teams? All branches of the military promote the idea of being part of something special and important; something that’s not for everybody: “The few, the proud, the Marines.” People want to be part of something special, but how often does a business advertise that it is a major accomplishment to make the team?

Each service has a clearly written mission, values and code of conduct. Recruits, trainees and veterans all know exactly what behaviors are expected and the consequences of failure to meet those standards. How many businesses take the time to articulate those things? How many use them for recruitment and for evaluation of all employees? Any organization can create a mission and values and code of conduct. It doesn’t cost a dime. We can’t all be the Marines, but that doesn’t mean our values and missions can’t be special.

Then there is indoctrination and training. The military spends months hammering home those unique values and ensuring recruits gain the skills they need. They constantly stress teamwork. Some don’t make it and are asked to leave. Businesses can’t match that level of training, but really, how much indoctrination and training does the average new hire get today? Most training, in my experience, is on performing tasks, not on values or teamwork. The priority seems to be getting busy hands working quickly, not building a great employee or a great team. When I hear about problem employees from business owners, more often than not the problems are with individual or group behavior.

Finally, there is responsibility. Watching those young people running a carrier flight deck brought home to me how little real responsibility is given to the average young employee. When you set the target low, that’s what you get. Giving younger employees enough responsibility to test them, with supportive supervision, is a great way to engage them and help them grow.

The economy will start turning around and businesses will be hiring again. Now would be a great time for business leaders to think about improvements in the recruitment, indoctrination and training processes and about documenting a compelling mission, values and code of conduct. It’s never too late to indoctrinate existing employees, so perhaps that should be on the agenda too. And when the hiring starts, don’t forget that there are many veterans out there who have great values and esprit de corps, are responsible and know how to be part of a high-performance team.

• Richard Randall is founder and president of management-consulting firm New Level Advisors in Springettsbury Township, York County. E-mail him at info@newleveladvisors.com.

This is one of the most critical times many businesses have faced in the last 30 years. Strategic planning for 2010-12 should be getting serious attention now, but it is neglected by many business owners because execution failures have given the process a bad rap.

I’ve identified what I believe are 10 of the most common reasons for failure. Businesses that avoid these will be far more successful.

1. Sending the plan down from the mountain. I met a business owner who wrote his strategic plan with his accountant and a consultant, then handed copies to his managers. A year later, he wondered why nothing was happening. He should have included managers of sales, marketing, design, logistics, HR and IT in the process. He didn’t include high-performing individuals or informal leaders at other levels. He passed over the breadth and depth of his best people, excluding everyone who could help him sell the plan to the whole organization.

2. Planning without gathering information on markets, customers, competitors and suppliers. To paraphrase Dilbert, some think market research is brainstorming the products we would want if we were crazy enough to be customers. Getting facts from the outside world is critical. Make sure conclusions drawn from the facts are carefully questioned and debated. Bad analysis can be just as deadly as bad data. Build your plan on a solid foundation.

3. Juggling too many goals and projects. Ever been listed as a key resource on 10 “critical” projects? I have, and I assure you it doesn’t work. You can excite people about participating on a really important project, but you demoralize them when you push a large number of initiatives at once. Your plan should include only a few very important “move the needle” initiatives. If not, go back and brainstorm some better ideas.

4. Failure to properly plan and commit resources. Execution plans should include specific resource details. Who will participate? What percentage of time will they devote and at what priority level? What funds are needed in which departmental budgets? The plan should be explicit and every affected department manager should be committed before the plan is launched. When resources aren’t planned and committed properly, they evaporate and execution tanks quickly.
5. Putting people you “can spare” on strategic projects. People you can spare should not be doing anything important; but when managers are asked for names for a special project, that often is what you get. Managers know they are more likely to get in trouble for losing an order than for slipping on a strategic initiative. Leaders should demand the best people for strategy execution. If department managers have a problem with that, they should start improving their departments.

6. Failure to align department and individual goals and incentives. If you are trying to reposition your business, charging higher prices for innovation, you don’t want your sales people pushing for lower prices because their bonus is based only on volume. But such things happen all the time because goals and bonuses are set at times out of synch with the planning process or at a local department level, often without assessing the impact on strategy.

7. Assuming you’ve communicated. George Bernard Shaw said, “The single greatest problem in communication is the illusion that it has taken place.” An all-hands meeting and blurb in the newsletter are not enough. Quarterly all-hands meetings, monthly department meetings and monthly newsletter reports are good, but you can always do more. People are bombarded. It’s harder than ever to get your message through.

8. Failure to measure results and hold monthly top-management reviews. What gets measured gets done. Top-management must devote one meeting a month to strategy execution. Are the dates being hit? Is the plan working? How do we get back on track? If your strategy isn’t worth one meeting a month, what is?

9. Failure to adapt. Dwight Eisenhower said, “Plans are nothing. Planning is everything.” In warfare and business, conditions change rapidly. Plans and leaders must be flexible and adaptive. Many strategic initiatives that fail to produce results are just good ideas executed too late by a management team that didn’t adapt.

10. Lack of leadership commitment. When the boss puts the strategic plan binder on the shelf, so does everyone else. The owner, CEO or president must be the one who drives the team to avoid all of these pitfalls. If top management lacks commitment, persistence and focus, strategic planning is a waste of time. Like so many other things, it all comes back to the person at the top.

After a customer complains or enters a warranty claim, there is a “moment of truth” when a company representative responds. In that moment, a business can lose or retain the customer. It can create a loyal advocate or a vocal critic, or the customer may quietly disappear.

I experienced multiple moments of truth recently when I went to pick up dry cleaned items and two dress shirts. The dry cleaning arrived first. My wife checked an item she was concerned about and saw a stain we had pointed out still was there. The item also didn’t appear to have been pressed. Other items were similarly unfinished.

When we complained, the first moment of truth began. The owner came out, agreed there was a problem, apologized and promised to make it right. That was good. She steamed out the stains and wrinkles. Twenty minutes after we entered the shop, she handed us the cleaned items with a smile. The moment of truth was over. The problem had been corrected, but I was not totally satisfied.

The cleaner’s quality process had failed. We were lucky to find the problem before getting home or, worse, weeks later. The friendly rework was nice, but I expected more — a refund or credit for future business. Crediting a dry cleaning bill for a few items would have made little monetary difference to either party, but it would have sent a strong message about accountability and customer care. Often, it doesn’t cost much to buy a great deal of good will — or to lose it.

While waiting, we entered a second moment of truth. My shirts were missing. The owner, expressing concern that we had been there so long, promised to search high and low and call me that afternoon. That evening, the moment of truth ended with no call. I called her the following day. She had not found the shirts. Now I would need to go to the shop and file a claim. The needle on my satisfaction meter was moving south, but I filed the claim, initiating a 30-day waiting period for the shirts to reappear.

Thirty days later, I returned for compensation, and moment of truth No. 3. “Come back tomorrow,” I was told when I opted for cash instead of store credit. “The owner isn’t here, and only she can write a check.” When I returned, the owner again asked if I would like credit, which I knew would preserve the shop’s cash and force me to remain a customer. “Check, please!” I said. The check, per store policy, was a multiple of the price of laundering each shirt. After four trips to the shop and a month after losing two very new shirts, I left there with enough money to replace one. I probably won’t be back; and like many lost customers I didn’t complain loudly, I simply went away.

I went through a process that may have made sense to someone but was almost guaranteed to drive customers away. In 2009, with computerized order data, why couldn’t I process the claim over the Internet or telephone? Why did I have to arrange to be at the store with the owner to get a check? Couldn’t she delegate? With a store full of cash registers, why did I have to take a check and drive to the bank? That process wasn’t designed for customer satisfaction; it was designed around the preferences of the owners. The account credit offered would favor the store, not the customer. The cash payment calculation wasn’t designed to compensate the customer; it was designed to cap the owner’s liability.

Today, business leaders should ask a number of questions about warranty and complaint processes:

• Are customer satisfaction and retention the primary objectives of the processes?

• Are current forms and limits of customer compensation adequate to meet the objectives?

• Are personnel in the process properly trained?

• Is customer satisfaction with complaint resolution being measured and monitored?

Negative answers to any of these indicate an opportunity for improved customer satisfaction and retention. It’s much easier to grow sales with happy current customers than it is to find new ones or to regain those who have quietly gone elsewhere.

I can’t wait to see the string play out on this one. Detroit’s worst auto company, one of Europe’s worst and a company dominated by the Germany’s Opel. And let’s not forget the UAW board seat. What a mess.

There was an insurance guy from Italy quoted recently saying that Fiatx have the lowest insurance rates in Italy because no one would steal them. Quite an endorsement. In fact, outside of Italy, Fiat is a total non-factor in Europe. Chrysler just got hammered on quality by Consumers Reports and JD Power…but that’s not a scoop, is it? These two could probably learn something from the Germans, but they won’t.

This deal has got big problems, the first of which is that Fiat and Chrysler are two very poorly performing companies. They just don’t have the horses. Two wrongs don’t make a right and two weak companies don’t make a strong one. On top of that, the Fiat culture, Chrysler culture and German Opel culture just are not going to meld into some kind of synergistic winner. Quite the opposite – they are going to struggle to work together at all.

So if you are in the market for an American car buy a Honda….or maybe a Ford.

The posturing over the AIG bonuses is ridiculous. Retention bonuses are never tied to performance. So these aren’t big rewards for people who screwed up. Retention contracts are designed to keep employees who are needed employed until specific tasks are complete to assure some kind of orderly transitions in a business. For example, when you know you are closing a plant, you might give a retention contract to one or more managers, assuring them they will receive a bonus payment if they stick around until the closing is complete, rather than jumping ship at the first possible chance.

In the AIG case, they have these people who created complex financial instruments they are trying to sort out, and they have a real threat of the business shrinking dramatically in the future. If it’s every man for himself a lot of people might bail, leaving the company with few who would understand the insurance contracts they are sorting out and making the problem worse. So they’ve been given retention contracts to incentivize them to stick around.

We may not like that and we may not like the amounts promised, but we need to make sure we understand what we are talking about in the debate. The media makes no effort to explain this because it is just easier to stir up populist outrage over paying people who drove a company into the ground.

I think the retention bonuses are probably excessive in size. But the object of the contracts is retention, not performance, so it makes no sense, after the fact to be “outraged” that people with lousy performance are getting a bonus. Especially when it looks like all the outraged politicians have formed a circular firing squad and started shooting each other.

Cash is always king and never more than today. Getting paid fast is critical, but many companies shoot themselves in the foot all the way back at the quote stage, then keep firing and keep hitting that foot through the whole contract. Here are some quick tips that will help:

Problems start with gray areas in quotes that turn into disputes. Review all quotes for clarity and completeness. Don’t leave anything to the imagination. If you’re not clear on what the customer wants, get answers in writing and make sure your quote is detailed and responsive.

Purchase orders often don’t match quotes, especially in terms and conditions. When you get the customer’s PO, make sure it is complete and that everything agrees with your quote. If there are differences, resolve them with the customer and, if necessary, get a PO change notice for your file.

Badly documented changes during a contract can cause huge delays. The person cutting your check is often a payables clerk who knows nothing about verbal agreements you make with other customer employees. Get all changes documented with updates to the PO. If you need to start work immediately, have a standard change document on your letterhead describing the change and the cost. Have the customer representative sign and date it and send a copy to the customer’s buyer requesting a PO update.

Shipping screwups are another killer of quick payment. When shipping finished product make sure everything required is packaged, properly marked and shipped to the correct address. Documentation sometimes goes to a different address than the product. Get it right. When finishing other types of projects, have a final walk-through with the customer. If there are items to correct, create a formal punch-list and get the customer to sign off that completion of the list will complete the job. Then expedite closing out the punch list and get the customer’s signature on completion.

You can’t get paid if you don’t send the invoice. Make sure invoices go out in a timely manner. Many companies have problems with this, especially on projects with progress payments. Monitor your invoicing process closely.

Invoice errors are a golden excuse for non-payment. Make sure all invoices are carefully reviewed for accuracy.

Don’t leave anything to chance. Follow up before the payment is late. Ask the customer if they have everything they need to release the payment on time.

In this economy there is plenty of pressure on prices. Backlogs have evaporated and every opportunity to make a sale seems like the most important one ever. That’s an environment where your company can easily lose its grip on pricing strategy and give away far too much.

If all you do is push your sales people for more orders, they’ll go get them and your margins will evaporate faster than your backlog did. It’s more critical then ever to have an adaptive pricing strategy and a clear delegation of authority for pricing.

Company leaders must pull sales, operations and finance together to develop the strategy. Why? Because each is driven differently. Sales typically wants volume at the expense of margins. Finance wants margins, often at the expense of sales. And operations is all over the map. When backlogs are up, they think prices are too low. When they’re down, they think prices are too high. No one group has the best answer on pricing strategy- it takes a team and it’s up to the leader to pull it together.

Working together, the team should determine the broad strategy for discounts based on customer loyalty, volume and competitive issues. Product or service bundling, rebates and extended payment terms should also be considered and guidance should be established. Once the strategy is resolved, it’s time to write down the delegation of authority. Who needs to sign off on discounts and other concessions and at what levels of discount and sales volume? This is where you can maintain some control.

The last step in the process is monitoring results and adapting the strategy as needed. In this economy, all pricing levels are beta-tests, so when something doesn’t work, you need to adapt and revisit the strategy, not panic and give away the store.